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Home My WebLink About2015-08-12 PACKET 09.A. REQUEST OF CITY COUNCIL ACTION COUNCIL AGENDA MEETING ITEM # � DATE 8/12/2015 . r PREPARED BY: Parks and Recreation Zac Dockter ORIGINATING DEPARTMENT DEPARTMENT HEAD * * * * * � * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * :� � * * * * * * * * * * COUNCIL ACTION REQUEST: Receive Response to Previously Raised Council Comments and Requests regarding Ice Arena concession stand purchasing. SUPPORTING DOCUMENTS: � MEMO/LETTER: Memo from Zac Docker. ❑ RESOLUTION: ❑ ORDINANCE: ❑ ENGINEERING RECOMMENDATION: ❑ LEGAL RECOMMENDATION: ❑ OTHER: ADMINISTRATORS COMMENTS: �� r� ,� City Administrator Date * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Cottage Grove �here Pride and Prosperity Mee� To: Honorable Mayor and City Council From: Zac Dockter, Parks and Recreation Director CC: Craig Woolery, City Administrator Jordan Hirman, Ice Arena Manager Molly Pietruszewski, Recreation Supervisor Robin Roland, Finance Director Date: July 15, 2015 Subject: Ice Arena Concession Stand Purchasing Introduction At the July 1, 2015 City Council meeting, City Council asked staff to research Cottage Grove based options for purchasing product for the Ice Arena concession stand in an effort towards continued support and growth of the Cottage Grove business market. Background The Ice Arena operates its' concession stand under a very basic business model; provide quality food/beverage options, attain the highest profit margin possible while passing along good value to the customer in order to assure positive experiences for visitors to the Cottage Grove Ice Arena. As such, staff regularly seeks out opportunities for varying product lines, lowering product costs and adjusting price points. In consideration thereof, staff currently found that wholesale purchasing in the following manner best attains this goal: Product Category Supplier Soft Drinks, Powerade Midwest Coca-Cola Coffees, Hot Cocoa, Slushy Viking Beverage , Nachos, Ice Cream, Popcorn Oil Watson Hot Dogs, Candy, Chips, Misc Sam's Club Product Costs Staff frequently compares pricing between vendors to assure best pricing and value. Contracts are negotiated every 3-5 years for large distributors such as Midwest Coca-Cola, Viking Beverage and Watson due to the fact that these vendors provide and install equipment to dispense their specific product line (thus eliminating the need for the City to purchase and maintain equipment). All other product pricing is reviewed annually. To provide current figures, staff pulled a few products currently regularly purchased from Sam's Club to compare with competing wholesale and local vendors on an individual product basis. (Note: Cub Foods just recently began offering a 5% discount to community high-volume purchasers such as the Ice Arena. That discount is included in the figure below.) Prodi�ct� =��: � ; `Sam'sG�ub��,� Watson* � �� :S��sco� �' � �Cub'Foods ��` �V1%alrr�art �� Hot Dog/Bun $0.46 $0.66 $0.66 $0.54 $0.54 Cheeseburger $1.23 N/A N/A $1.19 $2.49 Chips 1 oz $0.25 N/A $0.53 $0.40 $0.31 Kit Kat $0.61 $0.67 $0.64 $0.94 $1.00 Soft Pretzel $0.41 $0.61 $0.70 $0.52 N/A Ring Pop $0.28 N/A M/A $0.48 N/A A ple Juice $0.52 N/A N/A $0.63 $0.61 �Watson and Sysco also charge for delivery. Costs range from between$6 and$12 per delivery and are not included in the figures above. "'N/A—means product is not available from this vendor The table below converts individual pricing to the annual additional costs associated with purchasing from an alternative supplier based on past sales volume. The low-priced vendor is the base price for all product categories; meaning all values shown represent an increase in expenditure to the City by choosing the alternative vendor. Product! Annual 5ales Sam's Club Watson S sco Cub Foods = Walmart Hot Dog/Bun 5,000 Low Price $1,000 $1,000 $400 $400 Cheeseburger 600 $24 N/A N/A Low Price $780 Chips 1 oz 1,500 Low Price N/A $420 $225 $90 Kit Kat 600 Low Price $36 $18 $198 $294 Soft Pretzel 3,500 Low Price $700 $1,015 $385 N/A Ring Pop 2,200 Low Price N/A M/A $440 N/A Apple Juice 500 Low Price N/A N/A $55 $45 It's important to note that the above tables are simply a snapshot of the product selection at the Cottage Grove Ice Arena. The actual menu is quite a bit larger than that provided above, meaning the net additional costs would be a much larger multiple of the table provided. Ordering Process Due to high sales volumes, efficiency of the ordering process is extremely important to assure that inventory is managed properly and with minimal staff resources. Below is an explanation of the ordering process for each vendor type. It is sequenced in order from the least amount of resources necessary to order product. Watson/Sysco — Online ordering is available for these suppliers. The ordering system is simple and product is delivered to the site weekly thus relieving staff from having to retrieve product. However, there is a delivery charge and staff has experienced times when product has been placed on backorder thus leaving the Ice Arena without product for a week or more (or in many cases, staff simply purchases the product in need from Cub or Sam's). With orders only being delivered once per week, additional inventory storage would be necessary to increase purchasing through these type of vendors. Sam's Club — Online ordering is available, delivery is not. Once the online ordering is complete (Click `n' Pull program), Sam's Club employees package the order and leave it at the checkout counter. Sam's Club is ten miles from the Ice Arena so gas/vehicle expenses are incurred. The entire process of retrieving the placed order to the Ice Arena usually takes one staff person about a half an hour. It is also worth noting that as a wholesaler, bulk packaging is available thus making storage and handling easier than purchasing in smaller quantities at stores such as Cub or Walmart. Product availability has rarely been a concern for Sam's Club Cub Foods/Walmart Online ordering is not available. Currently, to purchase from Cub Foods and/or Walmart staff would have to grab a cart and gather the product from each aisle the same as any other customer. In cases where large inventory is needed (which is often the case), at least two staff would have to participate in the ordering process to walk carts around the store. Although Cub Foods is only 2.3 miles and Walmart 3 miles from the Ice Arena, staff estimates at least double the staff time necessary to retrieve orders due to the stores inability to package the orders in advance. However, in phone conversations with the Store Managers at both Cub Foods and Walmart, both stated that they would be willing to work with the City to develop an ordering option via phone call, fax or email and having their staff prepare the order for retrieval. Once again, that is not a system currently in place and rather would have to be developed between staff and the store manager. Inventory As with any operation, and perhaps more importantly in food service where food safety and expiration exists, minimizing inventory while still providing consistent performance to the customer is critical. It's important that customers can rely upon the concession stand to consistently meet their needs. Running out of product is simply not an option. Yet, all foods have expiration dates and many have temperature sensitive requirements so it's equally important to minimize inventory on hand wherever practical. Ordering from Watson, Sysco or the like would require additional storage capacity at the Ice Arena in the form of dry storage, freezing and refrigeration to account for weekly ordering. Costs to build this storage space would likely exceed $10,000 in costs to meet National Food Safety (NFS) requirements. It's also important to note that in cases where immediate inventory recovery is necessary, staff would still rely upon Sam's Club, Cub Foods or Walmart for those emergency needs as it does now. Miscellaneous Although this report shows that it may be advantageous to adjust purchasing locations for some individual products, it is important to look at the process holistically. Currently, staff has chosen Sam's Club for much of the Ice Arena's product line due to low-cost pricing, order processing efficiency and product quality and variety. If a change in vendors is requested by the City, staff would recommend a complete transition to any such new vendor as opposed to adding another vendor to the purchasing process. Minimizing vendor processing increases efficiency. This report was generated with the "Shop Local" spirit in mind. It is important that staff continuously seeks out its local economy to identify ways in which to patronize and build relationships with those businesses most invested into Cottage Grove. However, this report also shows that there are many variables to consider beyond zip code that should be considered to maintain good business practices for the City itself. Staff hopes this report effectively presents all those findings to the Council for review. Staff Recommendation Receive report.